北控水务集团(00371) - 2021 - 中期财报

Company and Financial Overview This section provides fundamental company information and the Chairman's review of financial performance and strategic initiatives Company Information This section provides fundamental company information, including board members, registered office, principal bankers, and auditor - The company's principal bankers include major banks in Hong Kong and mainland China, such as Agricultural Bank of China, Bank of China, and Bank of Communications, indicating diverse financing channels[9] - The company's auditor is Ernst & Young[9] Chairman's Report The Chairman's report reviews H1 2021 performance, emphasizing steady growth, improved cash flow, and optimized profit structure Summary of H1 2021 Performance | Metric | Value | | :--- | :--- | | Operating Revenue | HKD 13.669 billion (+10% YoY) | | Profit Attributable to Shareholders | HKD 2.421 billion (+7% YoY) | | Basic Earnings Per Share | HKD 0.2401 | | Interim Cash Dividend | HKD 0.09 per share | | Net New Designed Capacity | 1,306,595 tons/day | | Total Designed Capacity | 43,431,331 tons/day | - The Group's asset-light transformation strategy has yielded significant results, with notable improvements in cash flow and enhanced capital management, supported by optimized accounts receivable management and successful issuance of low-interest Panda MTNs[13][17] - The Group continues to deepen cooperation with China Three Gorges Corporation under an asset-light model, participating in Yangtze River protection projects with a cumulative total investment of RMB 28.1 billion[15] - The company actively responds to the national '3060 Dual Carbon Goals', with its Luoyang Chandong Wastewater Treatment Plant selected as one of the first low-carbon urban wastewater treatment operation cases, demonstrating industry recognition for its low-carbon practices[18] Management Discussion and Analysis This section analyzes the Group's H1 2021 financial and operational performance, driven by water treatment services, with detailed reviews of revenue, costs, and balance sheet items Financial Summary This section presents H1 2021 financial performance by business segment and region, highlighting water treatment services as the primary profit driver H1 2021 Financial Performance by Business Segment | Business Segment | Operating Revenue (HKD million) | % of Total Revenue | Profit Attributable to Shareholders (HKD million) | % of Total Profit | | :--- | :--- | :--- | :--- | :--- | | Water Treatment Services | 5,202.2 | 38% | 2,328.1 | 58% | | - Wastewater and Reclaimed Water | 3,739.3 | 27% | 1,811.7 | 45% | | - Water Supply Services | 1,462.9 | 11% | 516.4 | 13% | | Water Environment Governance Construction Services | 6,917.5 | 51% | 1,229.4 | 31% | | - Integrated Governance Projects | 1,494.9 | 11% | 494.7 | 12% | | - Construction of BOT Water Projects | 5,422.6 | 40% | 734.7 | 19% | | Water Environment Governance Technical Services and Equipment Sales | 1,549.5 | 11% | 445.0 | 11% | | Total | 13,669.2 | 100% | 4,002.5 (Business Performance) | 100% | H1 2021 vs H1 2020 Performance Comparison | Metric | H1 2021 (HKD million) | H1 2020 (HKD million) | Growth Rate | | :--- | :--- | :--- | :--- | | Total Operating Revenue | 13,669.2 | 12,453.8 | +10% | | Profit Attributable to Shareholders | 2,420.8 | 2,268.4 | +7% | Business Review As of June 30, 2021, the Group operated 1,317 water plants and rural wastewater treatment facilities with a total designed capacity of 43,431,331 tons/day, covering various regions in mainland China and overseas - As of June 30, 2021, the Group owned 1,317 water plants and rural wastewater treatment facilities, with a total designed capacity of 43,431,331 tons/day[34][35] - During the period, the Group's total new project designed capacity was 2,055,200 tons/day, while exited projects had a designed capacity of 748,605 tons/day, resulting in a net increase of 1,306,595 tons/day[34] Water Treatment Services Water treatment services, including wastewater, reclaimed water, and water supply, are the Group's core business and primary profit driver, with mainland China as the main market Performance of Operating Water Treatment Services Segment (H1 2021) | Service Type | Region | Number of Plants | Designed Capacity (tons/day) | Operating Revenue (HKD million) | Profit Attributable to Shareholders (HKD million) | | :--- | :--- | :--- | :--- | :--- | :--- | | Wastewater and Reclaimed Water | Mainland China | 802 | 16,730,995 | 3,522.1 | 1,779.7 | | | Overseas | 52 | 496,708 | 217.2 | 32.0 | | Water Supply Services | Mainland China | 114 | 9,291,665 | 1,186.3 | 441.0 | | | Overseas | 37 | 1,373,864 | 276.6 | 75.4 | | Total | | 1,005 | 27,893,232 | 5,202.2 | 2,328.1 | - The average contract price for wastewater and reclaimed water treatment services in mainland China was approximately RMB 1.36 per ton, an increase from RMB 1.28 at the end of 2020[38] Water Environment Governance Construction Services This segment includes integrated governance and BOT water project construction, with integrated project revenue declining due to conservative investment, while BOT project profit decreased due to lower gross margin - In line with the Group's asset-light strategy, the investment approach for integrated governance projects became more conservative, leading to a decrease in construction operating revenue from HKD 1.68 billion to HKD 1.49 billion during the period[46] - Profit attributable to shareholders from construction of BOT water projects decreased by 30% year-on-year, primarily due to a decline in gross margin for new BOT water projects during the period[48] Water Environment Governance Technical Services and Equipment Sales As a comprehensive water system solutions provider, the Group's technical services and equipment sales business continued to grow, with revenue reaching HKD 1.55 billion Technical Services and Equipment Sales Performance | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Operating Revenue | HKD 1,549.5 million | HKD 1,280.0 million | | Profit Attributable to Shareholders | HKD 445.0 million | HKD 404.1 million | Financial Analysis This section analyzes the Group's financial position, noting a slight decrease in overall gross margin due to construction services, increased administrative expenses, and a lower gearing ratio - The Group's overall gross margin slightly decreased from 38% in the prior period to 37%, primarily due to a decline in gross margin for integrated governance project construction services from 27% to 18% and for construction of BOT water projects from 25% to 19%[54][55][56] Key Receivables Movement (June 30, 2021 vs December 31, 2020) | Item | June 30, 2021 (HKD million) | December 31, 2020 (HKD million) | | :--- | :--- | :--- | | Amounts due from contract customers | 48,795.4 | 45,405.9 | | Service concession arrangement receivables | 48,179.4 | 45,829.7 | | Trade receivables | 20,973.4 | 21,232.2 | | Total | 117,948.2 | 112,467.8 | - As of June 30, 2021, the Group's gearing ratio (net debt/total equity) was 0.98, a decrease from 1.01 at the end of 2020, mainly due to an increase in total equity from capital injection into a subsidiary during the period[69] - Total capital expenditure during the period was HKD 6.09 billion, primarily for the construction and acquisition of water plants (HKD 5.26 billion)[70] Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for the six months ended June 30, 2021, including the income statement, statement of comprehensive income, statement of financial position, statement of changes in equity, and cash flow statement Condensed Consolidated Income Statement For the six months ended June 30, 2021, the Group reported operating revenue of HKD 13.67 billion, gross profit of HKD 5.04 billion, and profit for the period of HKD 3.09 billion H1 2021 Condensed Consolidated Income Statement Summary | Metric (HKD million) | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Operating Revenue | 13,669.2 | 12,453.8 | | Gross Profit | 5,042.6 | 4,775.1 | | Profit from Operations | 4,696.8 | 4,244.7 | | Profit Before Tax | 3,762.7 | 3,481.3 | | Profit for the Period | 3,086.4 | 2,771.7 | | Profit Attributable to Equity Holders of the Company | 2,420.8 | 2,268.4 | Condensed Consolidated Statement of Financial Position As of June 30, 2021, the Group's total assets were HKD 182.55 billion, total liabilities were HKD 120.60 billion, and total equity was HKD 61.95 billion, with non-current assets forming the largest portion June 30, 2021 Condensed Consolidated Statement of Financial Position Summary | Metric (HKD million) | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | 182,553.7 | 174,401.1 | | - Non-current Assets | 140,042.5 | 132,953.7 | | - Current Assets | 42,511.2 | 41,447.4 | | Total Equity | 61,949.5 | 57,124.0 | | - Equity Attributable to Owners of the Company | 38,850.9 | 37,343.8 | | Total Liabilities | 120,604.3 | 117,277.1 | | - Non-current Liabilities | 72,658.1 | 65,355.1 | | - Current Liabilities | 47,946.2 | 51,922.0 | Condensed Consolidated Cash Flow Statement For the six months ended June 30, 2021, the Group's net cash used in operating activities was HKD 1.33 billion, net cash used in investing activities was HKD 1.13 billion, and net cash from financing activities was HKD 2.85 billion H1 2021 Condensed Consolidated Cash Flow Statement Summary | Metric (HKD million) | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | (1,329.9) | (4,201.7) | | Net cash used in investing activities | (1,125.4) | (1,151.0) | | Net cash from financing activities | 2,845.8 | 4,323.8 | | Net increase/(decrease) in cash and cash equivalents | 390.5 | (1,028.8) | | Cash and cash equivalents at end of period | 14,941.1 | 10,804.2 | Notes to the Condensed Consolidated Financial Information This section provides detailed notes to the interim financial statements, covering basis of preparation, accounting policy changes, segment information, revenue recognition, asset and liability composition, related party transactions, contingent liabilities, and capital commitments Operating Segment Information This note details revenue, performance, and assets by business segment and geographical region, with mainland China being the Group's primary revenue source - By geographical region, operating revenue from mainland China was HKD 12.96 billion, accounting for 94.8% of total revenue, with other regions contributing HKD 0.70 billion[101] Trade Receivables As of June 30, 2021, the Group's total trade receivables were HKD 20.97 billion, slightly lower than HKD 21.23 billion at the end of 2020, with the majority settled within three months - Trade receivables primarily arise from integrated governance project construction services, technical and consulting services, among others, with most non-interest bearing except for certain integrated governance project receivables[117] Contingent Liabilities As of June 30, 2021, the Group had contingent liabilities, mainly comprising bank guarantees for project bidding and performance, and corporate guarantees for credit facilities to associates, joint ventures, and third parties - The Group provided bank guarantees of HKD 925 million for project bidding and performance, and corporate guarantees of HKD 3.817 billion for associated companies and third parties[126] Capital Commitments As of June 30, 2021, the Group's total contracted but unprovided capital commitments were HKD 19.16 billion, primarily for new service concession arrangements and contributions to joint ventures Capital Commitments Summary | Item (HKD million) | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Transfer-Operate-Transfer (TOT) | 320.5 | 681.8 | | Build-Operate-Transfer (BOT) | 7,448.2 | 9,044.5 | | Contributions to joint ventures | 11,376.3 | 11,306.1 | | Total | 19,158.4 | 21,070.9 | Related Party Disclosures This note discloses significant related party transactions and balances, including deposits, loans, finance leases, guarantees, and service transactions with Beijing Enterprises Holdings and its subsidiaries, joint ventures, associates, and ABC Group - The Group maintains ongoing deposit and loan relationships with Beijing Enterprises Group Finance Co Ltd As of June 30, 2021, deposits with the company amounted to HKD 1.46 billion, and borrowings from the company were HKD 4.34 billion[133][134] - Following ABC Financial's capital injection into the Group's subsidiary BEWG Guangxi, ABC Group became a related party, engaging in deposit, finance lease, and loan financing transactions with the Group[135][136][137] Disclosable Information This section covers information required for disclosure under the Listing Rules, including directors' and major shareholders' interests, share option schemes, share award schemes, board changes, controlling shareholder's specific performance obligations, interim dividend distribution, and share transfer registration suspension Interests of Major Shareholders in Shares and Underlying Shares This section discloses major shareholders holding 5% or more of the company's shares as of June 30, 2021, with Beijing Enterprises Holdings Limited as the controlling shareholder and China Three Gorges Corporation as a significant shareholder Major Shareholder Holdings (June 30, 2021) | Shareholder Name | Number of Shares Held | Percentage of Issued Share Capital | | :--- | :--- | :--- | | Beijing Enterprises Holdings Limited (and parties acting in concert) | 4,121,607,070 | 41.12% | | China Three Gorges Corporation (and parties acting in concert) | 1,588,495,436 | 15.85% | Share Option Scheme The company's share option scheme adopted on June 28, 2011, expired on June 27, 2021, with no new options granted thereafter, and 254,526,000 unexercised options remaining as of June 30, 2021 - The share option scheme expired on June 27, 2021 During the period, 2,200,000 share options were exercised[155][157] Specific Performance Obligations of Controlling Shareholder This section discloses specific performance covenants in various loan and note agreements, requiring the controlling shareholder, Beijing Enterprises Holdings Limited, to maintain a minimum shareholding and management control in the company - Several loan and note agreements totaling billions of Hong Kong Dollars equivalent contain specific performance covenants requiring the controlling shareholder, Beijing Enterprises Holdings, to maintain a minimum shareholding (e.g., 35% or 40%) and control over the company[162][163] Interim Dividend The Board resolved to declare an interim cash dividend of HKD 0.09 per ordinary share for the six months ended June 30, 2021 - The company announced an interim cash dividend of HKD 0.09 per share, higher than HKD 0.084 per share in the prior period[164][109] Corporate Governance This section outlines the company's corporate governance practices, confirming compliance with the Corporate Governance Code, with one deviation, and effective risk management and internal control systems Corporate Governance Compliance The company complied with the Listing Rules' Corporate Governance Code during the reporting period, with one deviation due to the Chairman's inability to attend the AGM in person - The company complied with the Corporate Governance Code, with the sole deviation being the Chairman's inability to attend the AGM on June 9, 2021, due to global travel restrictions[167] Audit Committee The Audit Committee, composed of three independent non-executive directors, oversees financial reporting, risk management, and internal controls, and has reviewed and approved the interim results - The Audit Committee, comprising three independent non-executive directors and chaired by Mr She Junle, has reviewed and approved the unaudited interim results for the six months ended June 30, 2021[169] Risk Management and Internal Control The Board is ultimately responsible for the Group's risk management and internal control systems, which were deemed effective and adequate for the period ended June 30, 2021 - The Board believes the Group's risk management and internal control systems were effective and adequate during the reporting period, with no significant issues found that could affect financial, operational, and compliance controls[170]